Chinese state-owned enterprises 'hired' military hacking unit

Huang Zhenyu, one of five men charged with infiltrating U.S. organizations, is accused of creating a secret database to hold stolen data for a state-owned enterprise in China.

A U.S. criminal indictment against Chinese Army personnel over alleged hacking describes how stolen intellectual property was funneled to Chinese companies, an unresolved question for analysts.

In the first legal action of its kind, federal prosecutors charged five members of Chinese Army signals intelligence Unit 61398 with stealing nuclear, solar power and steel trade secrets from six U.S. organizations over eight years. China denies the accusations.

Unit 61398's activities have long been observed by computer security experts. It was publicly identified as "Advanced Persistent Threat 1" (APT1) in a February 2013 report from Mandiant, a company now owned by security firm FireEye, as one of many military-affiliated groups in China running sophisticated intrusion campaigns.

Although Mandiant revealed in great detail how the hackers operated, a mystery remained, said Richard Bejtlich, chief security strategist for FireEye and nonresident senior fellow at the Brookings Institution. How is the stolen intellectual property transferred to state-owned enterprises?

The third page of the indictment shows the U.S. Department of Justice may have figured it out.

"For example, one SOE [state-owned enterprise] involved in trade litigation against some of the American victims mentioned herein hired the unit, and one of the co-conspirators charged herein, to build a 'secret' database to hold 'corporate' intelligence," the indictment alleges.

That is "remarkable," Bejtlich said in a phone interview Monday. "That's like Alcoa hiring the NSA."

Bejtlich, a former U.S. Air Force intelligence officer, said analysts had theorized members of China's Communist Party who are on the boards of various companies had facilitated the transfers. The indictment would indicate a more business-like relationship.

"This is a new angle," Bejtlich said.

One of the men charged in the indictment, Huang Zhenyu, is alleged to have done programming work for what is identified as "state-owned enterprise 2" between 2006 and 2009.

Part of that work included "the creation of a 'secret' database for SOE-2 designed to hold 'corporate' intelligence about the iron and steel industries, including information about American companies," the indictment reads.

FireEye continues to track Unit 61398. After Mandiant issued its report, the unit laid low and discarded much of its command-and-control infrastructure, which was its network of hacked computers used to stage attacks, Bejtlich said.

By the end of last year, the group rebuilt its command-and-control infrastructure, staying somewhat quiet but still targeting U.S. companies with phishing emails, Bejtlich said.

"We have not seen the Chinese back down on any of this activity," he said. "And that's what kind of interesting -- will we see something like that now? I highly doubt it, but we will be watching."

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